OSTK - Overstock.com

[lessthaniv]

Francis trimmed 132,000 shares. Not huge.

[lessthaniv]

Francis keeps trimming.

 

Anyone with access to a Bloomberg terminal that can tell me what the current short interest is?

 

Thanks in advance.

[valueinvesting101]

Short interest = 3.3M

 

% of float = 20.91%

[lessthaniv]

Short interest = 3.3M

 

% of float = 20.91%

 

Does that come from the Nasdaq site or is that up to the day?

Thanks for helping out.

[txlaw]

http://gigaom.com/2013/07/30/why-overstock-decided-to-start-a-price-war-with-amazon

[Parsad]

Boy, that's a mistake!  They tried this back in 2003...how did that go?  You can see the old video on YouTube where Patrick talks to CNBC about undercutting Amazon's book business. 

 

I don't know why they want to take on the goliath.  Did Costco take on Walmart or stick to a niche area?  See's isn't going to hunt down Hershey's.  You can make a great little business, with a cult following, in a very specific niche, and make your shareholders and employees rich over time.  Or you can possibly go out of business because you decide to take on the incumbent leader.  Cheers!

[fareastwarriors]

http://www.digitalbookworld.com/2013/overstock-continues-to-wage-pricing-war-with-amazon-with-new-discounts/

 

 

Overstock Continues to Wage ‘Pricing War’ With Amazon With New Discounts

 

[Guest hellsten]

Overstock.com intends to begin rolling out a new international program by mid-October, and hopes to introduce software, logistics systems, and e-commerce businesses for over 100 countries in six to nine months, Byrne said. "We think there are some places that have very little e-commerce now in their native languages and will be good opportunities for us," the CEO told The Fly in an interview yesterday. "We figured out a supply chain and website that works for international operations," he added. Overstock currently has product descriptions in eight different languages and offers shipping to foreign countries on its main website, but only about 2% of its revenue comes from abroad, Byrne noted.

 

Overstock is growing more than 15%, while the ecommerce sector as a whole is expanding at a 15% pace, so Overstock should be gaining market share, Byrne added.

 

Overstock recently ended a promotion in which the company sold books for at least 10% below Amazon’s prices. The promotion generated a "huge spike in traffic," but would have cost Overstock $3 million per year to maintain, Byrne stated, adding that he estimates the resulting price war would have cost Amazon $500 million annually. "It was a close call," but Overstock decided not to take that route, Byrne indicated.

 

http://www.theflyonthewall.com/permalinks/entry.php/OSTK;AMZN;EBAY;GOOGid1877377/OSTK;AMZN;EBAY;GOOG-Overstockcom-targets-major-international-presence-by-mid

[Parsad]

Overstock.com intends to begin rolling out a new international program by mid-October, and hopes to introduce software, logistics systems, and e-commerce businesses for over 100 countries in six to nine months, Byrne said. "We think there are some places that have very little e-commerce now in their native languages and will be good opportunities for us," the CEO told The Fly in an interview yesterday. "We figured out a supply chain and website that works for international operations," he added. Overstock currently has product descriptions in eight different languages and offers shipping to foreign countries on its main website, but only about 2% of its revenue comes from abroad, Byrne noted.

 

Overstock is growing more than 15%, while the ecommerce sector as a whole is expanding at a 15% pace, so Overstock should be gaining market share, Byrne added.

 

Overstock recently ended a promotion in which the company sold books for at least 10% below Amazon’s prices. The promotion generated a "huge spike in traffic," but would have cost Overstock $3 million per year to maintain, Byrne stated, adding that he estimates the resulting price war would have cost Amazon $500 million annually. "It was a close call," but Overstock decided not to take that route, Byrne indicated.

 

http://www.theflyonthewall.com/permalinks/entry.php/OSTK;AMZN;EBAY;GOOGid1877377/OSTK;AMZN;EBAY;GOOG-Overstockcom-targets-major-international-presence-by-mid

 

They should just let me run the company!  ;D  Cheers!

[lessthaniv]

At least he came to his senses!

[Guest hellsten]

Q3 results are out:

http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-newsArticle&ID=1865548&highlight=

 

Key Q3 2013 metrics (comparison to Q3 2012):

Revenue: $301.4M vs. $255.4M (18% increase);

Gross margin: 19.6% vs. 18.2% (140 basis point increase);

Gross profit: $59.2M vs. $46.5M (27% increase);

Sales and marketing expense: $22.5M vs. $14.9M (51% increase);

Contribution (non-GAAP measure): $36.7M vs. $31.6M (16% increase);

Technology and G&A expense: $33.2M vs. $29.9M (11% increase);

Net income: $3.5M vs. $2.7M (31% increase); and

Diluted EPS: $0.14/share vs. $0.11/share ($0.03/share improvement; 27% increase).

 

I guess the result is OK, but market is unhappy and OSTK is down 8% pre-market…

[Parsad]

Q3 results are out:

http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-newsArticle&ID=1865548&highlight=

 

Key Q3 2013 metrics (comparison to Q3 2012):

Revenue: $301.4M vs. $255.4M (18% increase);

Gross margin: 19.6% vs. 18.2% (140 basis point increase);

Gross profit: $59.2M vs. $46.5M (27% increase);

Sales and marketing expense: $22.5M vs. $14.9M (51% increase);

Contribution (non-GAAP measure): $36.7M vs. $31.6M (16% increase);

Technology and G&A expense: $33.2M vs. $29.9M (11% increase);

Net income: $3.5M vs. $2.7M (31% increase); and

Diluted EPS: $0.14/share vs. $0.11/share ($0.03/share improvement; 27% increase).

 

I guess the result is OK, but market is unhappy and OSTK is down 8% pre-market…

 

I think they are unhappy for two reasons...the stock was way ahead of itself and look at that sales/marketing expense line...there's another $5-7M in profit in that line.  I don't know why the big jump, even with the ramp up to Christmas!  Cheers!

[Guest hellsten]

Q3 results are out:

http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-newsArticle&ID=1865548&highlight=

 

Key Q3 2013 metrics (comparison to Q3 2012):

Revenue: $301.4M vs. $255.4M (18% increase);

Gross margin: 19.6% vs. 18.2% (140 basis point increase);

Gross profit: $59.2M vs. $46.5M (27% increase);

Sales and marketing expense: $22.5M vs. $14.9M (51% increase);

Contribution (non-GAAP measure): $36.7M vs. $31.6M (16% increase);

Technology and G&A expense: $33.2M vs. $29.9M (11% increase);

Net income: $3.5M vs. $2.7M (31% increase); and

Diluted EPS: $0.14/share vs. $0.11/share ($0.03/share improvement; 27% increase).

 

I guess the result is OK, but market is unhappy and OSTK is down 8% pre-market…

 

I think they are unhappy for two reasons...the stock was way ahead of itself and look at that sales/marketing expense line...there's another $5-7M in profit in that line.  I don't know why the big jump, even with the ramp up to Christmas!  Cheers!

 

Yes, part of the increase (1-2 million?) is from the book promotion campaign. I wonder where the rest comes from, international expansion? Luckily I averaged out a few months ago. Chou Opportunity has sold -87.02%. Short interest is 15%. I would really like to hear what Chou thinks of JCP and SHLD; I guess there's not much to add to what has been discussed on this board.

 

-18% now :o Mr. Market is back.

[DCG]

So I placed separate orders through this crappy company for Christmas gifts over 3 weeks ago. Neither order shipped. Their custom service department of course apparently doesn't even take phone calls. I chatted them and they said they'll email me an answer in 2-3 days. I chatted them again and the guy was arguing with me saying that the orders did ship, when the Fedex tracking info clearly shows they did not. The best resolution they were able to offer me was a $5 store credit (which is useless, since I'll never order from them again) and that they'll contact me in a few days to let me know if they can actually ship these orders.

 

 

Awful experience and the last time I'll order from this company.

[DCG]

So I placed separate orders through this crappy company for Christmas gifts over 3 weeks ago. Neither order shipped. Their custom service department of course apparently doesn't even take phone calls. I chatted them and they said they'll email me an answer in 2-3 days. I chatted them again and the guy was arguing with me saying that the orders did ship, when the Fedex tracking info clearly shows they did not. The best resolution they were able to offer me was a $5 store credit (which is useless, since I'll never order from them again) and that they'll contact me in a few days to let me know if they can actually ship these orders.

 

 

Awful experience and the last time I'll order from this company.

 

So I finally received 2 emails from overstock (4 days later) saying they can't locate the products I ordered in their warehouse. Then they send another canned-response email a few minutes later saying 'We believe that we have resolved your inquiry. However, if it has not been answered to your satisfaction, you may reopen it within the next 7 days.'. They of course resolved nothing.

 

Worse shopping experience I've had in a long time. I understand that mistakes happen, but their customer service was pathetic.

[Mephistopheles]

So I placed separate orders through this crappy company for Christmas gifts over 3 weeks ago. Neither order shipped. Their custom service department of course apparently doesn't even take phone calls. I chatted them and they said they'll email me an answer in 2-3 days. I chatted them again and the guy was arguing with me saying that the orders did ship, when the Fedex tracking info clearly shows they did not. The best resolution they were able to offer me was a $5 store credit (which is useless, since I'll never order from them again) and that they'll contact me in a few days to let me know if they can actually ship these orders.

 

 

Awful experience and the last time I'll order from this company.

 

So I finally received 2 emails from overstock (4 days later) saying they can't locate the products I ordered in their warehouse. Then they send another canned-response email a few minutes later saying 'We believe that we have resolved your inquiry. However, if it has not been answered to your satisfaction, you may reopen it within the next 7 days.'. They of course resolved nothing.

 

Worse shopping experience I've had in a long time. I understand that mistakes happen, but their customer service was pathetic.

 

You should complain on their fb page, they tend to be helpful and responsive there it seems like.

[constructive]

Is anyone interested again, since the Q4 results and the plunge from $30 to $20?

 

I find it interesting that OSTK pre-profitability, and unprofitable retailers like SHLD and JCP, seem to attract much more discussion than OSTK post-profitability.

 

Certainly there is a huge disconnect between OSTK and AMZN/NILE/ZU ratios.

[OracleofCarolina]

http://www.mercurynews.com/business/ci_25195165/overstock-com-slapped-nearly-7-million-fine-false

 

Why doesn't this surprise me?

[OracleofCarolina]

With OSTK getting back down to the $14 dollar range, i decided to take a look again. Then I saw this today..wtf...$75-90 million for a headquarters??

 

Item 1.01 Entry into a Material Definitive Agreement.

 

 

On May 5, 2014, O.Com Land LLC (the “Company”), a wholly owned subsidiary of Overstock.com, Inc., entered into a Purchase and Sale Agreement dated May 5, 2014 with Gardner Bingham Junction Holdings, L.C. and Arbor Bingham Junction Holdings, L.C. (the “Agreement”) to purchase approximately 13.99 acres of real property located in the Salt Lake Valley, together with its improvements and appurtenances (collectively, the “Parcel”). The Agreement requires an earnest money deposit of $125,000. The Parcel purchase price is approximately $7,920,000. The Agreement provides for a due diligence period of 90 days for the Company to survey and review information concerning the Parcel and obtain permits and approvals to allow for the Company’s development of a headquarters facility on the Parcel. The Agreement provides for a right of repurchase in the seller if the Company does not commence construction of an office building of at least 220,000 square feet and specified parking facilities within 24 months of the closing date of the Parcel purchase.

 

 

On May 5, 2014, O.Com Land LLC (the “Company”), a wholly owned subsidiary of Overstock.com, Inc., entered into a Project Management Agreement (the “Agreement”) for the development of an office building to serve as Overstock.com headquarters (the “Project”), to be constructed in the Salt Lake Valley on approximately 13.99 acres of real property which the Company intends to purchase. The Agreement covers development services to be performed by Gardner CMS, L.C. a Salt Lake City-based developer. Services include enumerated pre-construction, construction, and completion phases of the Project and other services. The Company will pay $3,500,000 for the development services.

The Company's preliminary estimate of the aggregate costs of the corporate facility are likely to be in the range of $75 million to $90 million.

 

[valuecfa]

Thank you for bringing it to my attention. I wasn't expecting to get back into OSTK so soon. Great value at current prices

 

With OSTK getting back down to the $14 dollar range, i decided to take a look again. Then I saw this today..wtf...$75-90 million for a headquarters??

 

Item 1.01 Entry into a Material Definitive Agreement.

 

 

On May 5, 2014, O.Com Land LLC (the “Company”), a wholly owned subsidiary of Overstock.com, Inc., entered into a Purchase and Sale Agreement dated May 5, 2014 with Gardner Bingham Junction Holdings, L.C. and Arbor Bingham Junction Holdings, L.C. (the “Agreement”) to purchase approximately 13.99 acres of real property located in the Salt Lake Valley, together with its improvements and appurtenances (collectively, the “Parcel”). The Agreement requires an earnest money deposit of $125,000. The Parcel purchase price is approximately $7,920,000. The Agreement provides for a due diligence period of 90 days for the Company to survey and review information concerning the Parcel and obtain permits and approvals to allow for the Company’s development of a headquarters facility on the Parcel. The Agreement provides for a right of repurchase in the seller if the Company does not commence construction of an office building of at least 220,000 square feet and specified parking facilities within 24 months of the closing date of the Parcel purchase.

 

 

On May 5, 2014, O.Com Land LLC (the “Company”), a wholly owned subsidiary of Overstock.com, Inc., entered into a Project Management Agreement (the “Agreement”) for the development of an office building to serve as Overstock.com headquarters (the “Project”), to be constructed in the Salt Lake Valley on approximately 13.99 acres of real property which the Company intends to purchase. The Agreement covers development services to be performed by Gardner CMS, L.C. a Salt Lake City-based developer. Services include enumerated pre-construction, construction, and completion phases of the Project and other services. The Company will pay $3,500,000 for the development services.

The Company's preliminary estimate of the aggregate costs of the corporate facility are likely to be in the range of $75 million to $90 million.

[spark411]

I don't think the new office is a big deal.  First of all, OSTK management said that their cost for using the space will be approximately the same i.e.  it will cost the same to pay the mortgage for the new space as it does for paying the lease for two spaces.    Also, OSTK management said that their biggest need are more technology programmers.  Having a state of the art facility will help them attract talent which will enhance their moat.  Finally, buying an office building that will appreciate in value over time is better than leasing a space and paying a landlord.

 

My biggest concern is their Return on Equity will decrease with a Property purchase and thus their stock may not grow as it would have otherwise.

 

Overall, i think this stock is undervalued.  The free cash flow equates to about a 10% yield for a company that has a high ROE and is growing.  Also, the management is wired to continually improve which gives me confidence.

 

Thanks

[Andy Dufresne]

Hi guys,

 

Trying to summarise my thoughts on the company. Feedback is appreciated:

 

1. Share price down 60% in the past year (from USD 35 to USD 14) despite reasonable operating results, positive FCF with good FCF yield; large cash position with no debt; while Francis Chu sold ~80% of his position around USD 30 the Byrne family and Fairfax haven't sold a share. CEO Bryne personally holds roughly 50% of the company (directly 27.2% and an additional 22.8% via High Plains Investments LLC).

 

2. Operating metrics:

- 5 yr Rev growth ~ 10% but lumpy and much of it only coming in the past 2 years); GM relatively stable around 18-19%; P/E(2013) ~3.86 TTM P/E 4.04;

- TTM FCF* 38m (adjusted for AP & accrued liabilities that ran over from 2013 due to timing of Thanksgiving); net debt -110m (no debt, cash of 110m); MVe 342m -> EV 232m; FCF yield ~ 16.4%;

 

3. Points of concern:

 

- # of customers is not growing and CEO's answers to how this will change have not been convincing IMHO;

- Margins not really improving despite average transaction price increasing

- Continuing High R&D costs without any clear revenues being made from this investment or a spurt in revenue growth - 5 yr "Technoloogy" spend (2009-2013) ~315m USD!!!

- General feeling from the CCs that the company lacks focus - too many initiatives, lacks integrity to acknowledge that they essentially are a discount home & garden online retailer, and that mgmt has no has no clear blueprint for increasing FCF - e.g. perhaps investing in better sales and marketing people

- In the past 12 months officers & directors of the company have only sold shares, including recently at prices not dissimilar to the current share price

- Potential depreciation useful life accounting shenanigans re-appearing:

 

http://seekingalpha.com/article/1778882-is-overstock-com-trying-to-cook-the-books-again

 

Please note that Sam Antar has been at it against the company for a good while:

 

http://www.whitecollarfraud.com/overstock-accounting-fraud.html

 

From the 10-K's I have seen the useful life estimate has indeed been changed and annual depreciation expenses have gone down about 10% compared to 2011-2012; I have not looked into the 10Qs - however, the reduction in depreciation expenses (roughly 1.5 m) would explain only 2% of TTM income (but 4 times more based on 2012 income).

 

4. Positive points

 

- Positive CF from operations over past 3 years;

- Mgmt finished paying down debt and has not done yet something truly stupid with its massive cash hoard (OTOH they are unable to decide on returning money to shareholders)

- Revenue per employee on par with Amazon (roughly 850k/annum/employee)

 

Graham P/E formula would suggest a P/E of 9 to 10, which is roughly where the company was a year ago and from Chu's letters I surmise he too thought (last year) that they were worth 30-40 USD per share; they are, of course, very cheap compared to the general market, not to mention Amazon et al. Fairfax continues to hold it (and its a top 5 holding for FFH). There has been no material change in the operating results and FCF yield is not bad;

 

Of course none of this explains why the stock has gone down so badly despite the market heading north, so any info you have would be appreciated!

[Patmo]

If you adjust for the $73mil tax gain, the ttm P/E is like 20-25ish. Am I missing something here?

[cubsfan]

Nice summary Andy, looks very interesting, but in regards to the following point you made:

 

Mgmt finished paying down debt and has not done yet something truly stupid with its massive cash hoard

 

Have not followed that closely, but Overstock recently announced the construction on a new HQ building.

Not sure how that factors into you analysis, maybe they take on significant debt again or overspend?

 

edit - sorry, i see this was addressed in recent posts.

[Andy Dufresne]

If you adjust for the $73mil tax gain, the ttm P/E is like 20-25ish. Am I missing something here?

 

Patmo - thanks! I do not know how this slipped away .... this gives rise to the following adjustments to the thesis:

 

1. Adjusted P/E of almost 21 (342.2/16.34), so they are not cheap on a P/E basis ...

 

2. The company had significant NOLs - "At December 31, 2013 and 2012, we had federal net operating loss carryforwards of approximately $152.2 million and $174.1 million and state net operating loss carryforwards of approximately $141.2 million and $151.6 million" - they decided to recognize them under GAAP at this time which signals they think they will be profitable. May also give rise to the concern that they are trying to hide the fact that despite an almost 20% increase in YoY revenue, there was negligible impact to the bottom line given high operating costs